Brands in the News

U.S. Airlines Fight Back

23 Apr , 2015  

The big three U.S. carriers are fighting back.

The aviation giants are appealing to the U.S. government, claiming that Emirates, Qatar and Etihad are competing unfairly. They hope the government will limit the new carriers’ access to the U.S. market.

The strategy makes perfect sense.

Delta, United and American have to defend. The Mid-East carriers are going after long-haul travelers, especially lucrative business travelers willing to pay for a business class or first class ticket. This is the most important segment of the global air transport industry.

The new carriers are having considerable success. Dubai, home of Emirates, is now the world’s largest airport in the world in terms of international travel. The carriers have built huge fleets in just a few years, with more planes on order.

When competitors are stealing market share, you have to respond.

The problem is that stopping the new carriers won’t be easy, because they provide great service at competitive prices. The planes are new and snazzy. On Emirates you can take a take shower while crossing the Atlantic, and then relax at the in-flight bar. You can’t do this on United, American or Delta.

The U.S. carriers understand that they simply can’t compete. They just can’t duplicate the experience at a similar price.

This is a problem.

The reason that the new carries are so successful could be that they are receiving government subsidies. This lets the airlines fly routes that are otherwise unsustainable, and provide a level of service that exceeds the price. I suspect this is true; I have trouble believing that Emirates can be profitable flying dozens of gas-guzzling A380s all over the world.

But it doesn’t really matter. The U.S. airlines can’t win on quality.

Which means the best response is to use government regulation to block the competitors. If successful, regulations can limit access to the U.S. market. This reduces the threat.

The U.S. carriers are in the same boat. This is why the CEOs are working together to make the case that regulations are important. All three were in Chicago this week, highlighting the need for limits on the new entrants.

They are smart to work together and smart to pursue this defensive strategy.

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4 Responses

  1. Marc says:

    Not a big fan of advocating government protection either. However, regulatory bodies demand for an equal playing field. This is happening in many industries, aviation should not be excluded from that. It has become a public theme too, at least in Europe.

    Still I think the airlines are end responsible in drawing up their own strategy and future. I strongly believe in the service component. Make sure that you are different as an airline and offer an incomparable experience. And stay away from the middle. This is exactly the problem for many airlines, also the long haul airlines from Asia. Malaysian for instance is virtually bankrupt and has to deeply cut in their operations.

    @Travel Advocate. In Europe low cost carriers easyJet and Ryanair are not known for their superior service. On the contrary. They are highly successful because of their pricing strategy, i.e. low prices. Period. You cannot compare them with for instance Southwest, which managed to combine favorable prices with a positive service experience.

  2. Travel Advocate says:

    Nonsense. The US carriers cannot compete on their own account (inefficient, old aircraft, poor customer service, etc.). Sounds like you have not been following the aviation market, because the big three, especially Delta, has been very profitable during the last few years. In fact, two years ago Delta posted the highest profit of any airline ever. However, none of these are quite as profitable as Southwest (25 years straight profitable) and no one is subsidizing them. It is time for the remaining US legacy carriers to either compete on their own terms or disappear. The flying public does not need them and we do not owe them anything. For domestic flights we have Southwest, JetBlue, Allegiant, Virgin America, all with much superior service and profitable (with NO GOVERMENT HELP!). On the longhaul, we have the Mideast carriers (Emirates, Etihad, Qatar) and Asian (Singapore, Asiana, Malaysia, Cathay, Korean, Japan) and now the quite successful Latin American carriers such as LAN/TAM and Copa, as well as the low cost carriers such as Gol and Volaris.

    It is despicable that you are advocating government regulation. Liberalization of global air transport market has fueled rapid expansion and development. This has benefited millions of people. If the US legacy die, who cares. Same is happening in Europe, where easyJet and Ryanair are taking over with far superior service, safer and profitable than the sluggish European legacies.

    Emirates is quite profitable and does not require subsidies. People are willing to pay a premium to fly on their flights. Also, their newer generation aircraft is more fuel efficient. Usually their first and business class cabins are packed. For example, the IAH-DXB flight was profitable from day one.

    Government protection in any industry has been so destructive throughout history. Lots of history and precedents, so please stop the nonsense of advocating government protection.

  3. Supper says:

    The US airlines should take the case of slavery up because the ground staff who work for the likes of Emirates are paid so little it’s ridiculous. Most of them are immigrant works with little in terms of rights. The biggest subsidy they get is their labor cost is low due to imported migrant workers(slaves) who never have any opportunity to improve their lives or make a home in the UAE/Qatar for themselves.
    However the US airlines should take a look at themselves and stop thinking themselves as transportation companies. Airlines are hotels in the air and that’s where Emirates, Etihad and Qatar Airways beat them.

  4. Mark Miscavage says:

    Global competition. It is about time the US big 3 airlines start to get worried.

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